Overview
The lecture covers how to identify and trade using key levels in price action—support, resistance, highs, and lows—focusing on market control, breakouts, corrections, and trend continuation for effective trading decisions.
Support and Resistance Basics
- A support level is where price tends to stop falling and often reverses upward.
- Traders commonly buy at support with stops below the level, targeting the resistance above.
- You can also sell at or under support if conditions favor sellers.
- Resistance is where price tends to stop rising, often reversing downward.
- While typical advice is to sell at resistance, you can also buy at resistance when market context allows.
Market Control: Buyers vs Sellers
- Support and resistance levels can be seen as zones where buyers or sellers have control.
- At higher price levels (resistance), sellers aim to push price down.
- At lower price levels (support), buyers attempt to push price up.
- Price fluctuates between these zones while buyers and sellers battle for control.
Indications, Corrections, and Continuations
- A breakout below support or above resistance signals that one party has gained control (sellers or buyers).
- After a breakout, look for a correction (pullback or retest) before continuation of the trend.
- Entries are made after confirmation of the trend direction and control.
- Never trade just the breakout; wait for indication and correction phases to confirm control.
Trade Execution and Trends
- Enter trades after a clear breakout, with confirmation from a closed candle under or over the zone.
- Set stop losses above previous highs for sells or below previous lows for buys.
- Downtrends are characterized by lower lows; uptrends by higher highs.
- Avoid trading in ranges where both buyers and sellers are actively fighting.
Entry Confirmation and Timeframes
- Confirmation to enter = price closes under/over key level (zone) with sellers/buyers in control.
- Mark key levels on higher timeframes (like 1h), but can execute trades on 5m, 15m, or 30m as long as trends align.
Examples and Trade Management
- Trade setups: sell after new lows, buy after new highs once key zones are broken.
- Always use reaction areas, swing highs/lows for entries; adjust stop loss size as needed.
- Don’t expect targets to be exact exit points; monitor for trend continuation or reversal.
- Avoid trading every fluctuation—wait for clear structure and indications.
Key Terms & Definitions
- Support — Price level where buyers are expected to enter, stopping declines.
- Resistance — Price level where sellers are expected to enter, stopping advances.
- Breakout — Price moving decisively above resistance or below support.
- Correction (Pullback/Retest) — Temporary move against the trend after a breakout.
- Indication — Signal that one side (buyers or sellers) has gained control at a level.
- Swing High/Swing Low — Local maximum/minimum points in price action.
- Trend — The prevailing direction of price movement (uptrend or downtrend).
Action Items / Next Steps
- Practice identifying support, resistance, swing highs, and lows on your charts.
- Backtest trade entries only after confirmed indications and corrections.
- Use multi-timeframe analysis to align your trade entries with broader trends.